Euro Zone

Hugo Dixon: Greek ultimatum is a bad idea

1 Jun 2015

Some say the euro zone and IMF should present Greece with a take-it-or-leave-it offer, set a deadline, and threaten to cut off its banks if it doesn’t agree. This could play into the hands of Greek nationalists who would argue that foreigners were again bullying Athens.

Greece cries wolf, genuine beast may lurk

26 May 2015

Greek ministers are threatening a default on IMF loans. They might be bluffing, like Aesop’s shepherd boy. That scamp found that lying does not pay. The Syriza government may know more about extreme game theory, but it could end up out of the euro zone, or mauled by the ECB.

Euro pessimists are taking the long view

26 May 2015

The single currency is below $1.09 for the first time in nearly a month. Its short-term fortunes may depend as much, if not more, on when U.S. rates will rise as what happens in Greece. But options prices reveal that euro bearishness is becoming more and more entrenched. 

Spain starts confusing political transformation

26 May 2015

Local election results intensify the decline of the ruling People’s Party. In Barcelona and Madrid, coalitions backed by leftist Podemos upstarts could emerge as winners. November’s general election may clarify the political order. Meanwhile, investors will fear paralysis. 

Debt extension could help Syriza but hurt Greece

22 May 2015

Europe could split off payments owed to Greece from its second bailout, according to reports. The move could break an impasse over reform talks and avoid a messy default. Yet Europe would have less leverage over the Syriza-led government and the Greek economy would suffer. 

ECB struggles with central bank news frenzy

21 May 2015

When markets hang on your every word, rate-setters have to be careful what they say to whom. An ECB board member crossed the line and the euro zone central bank is under fire. Now it’s clamping down on dealings with media. Such undersharing can be just as bad as oversharing.

Europe’s next banking headache: Basel IV

20 May 2015

A new set of Basel-originated rules for lenders could hike risk-weighted assets by over 10 pct. Institutions would then have to delever or find fresh capital. Brussels might find the effect on European banks clashes with its desire to rekindle economic growth.

Germany on course to waste 50 bln euro opportunity

20 May 2015

The country’s leaders have finally noticed the need for more infrastructure investment. But political inertia is set to delay for years any meaningful rise in outlays. By then, tough anti-debt rules may again restrict spending. Berlin would do better to spend now and worry later.   

ECB can live with bankrolling Greece

19 May 2015

Athens’ borrowing from the European Central Bank has Germany’s Jens Weidmann fretting over euro zone rules that prohibit monetary financing. The ECB’s guilt depends on the severity of its judge. In the real world, its pragmatic approach looks defensible and effective.

Athens and Europe should rethink their Greek myths

15 May 2015

Both debtor and creditors are telling tales which leave out key facts. The incomplete and incompatible narratives make agreement on the next bailout harder, and the risk of a crisis greater.

Spain’s Ciudadanos raises hopes for more reform

15 May 2015

The centrist party is rising in the polls with a reformist agenda while Podemos is deflating. Ciudadanos could have a big say on future policy as kingmaker in the general election, and it is already having an impact. But like Podemos, it faces risks.

EU growth surprises hide clear pattern

13 May 2015

Recovering Spain was still the GDP star in the first quarter, but traditionally strong Germany did no better than perpetually stagnant Italy, while France defied gloomy predictions and the UK disappointed. Behind the mix-up, the recoveries are real, but mostly slow and unsteady. 

Draghi is winning the main QE battle

12 May 2015

Had European Central Bank bond-buying aimed to depress yields, Mario Draghi would be in a bad way. Yields have risen since the ECB chief pushed the button. But inflation expectations are a more critical target, and they are up, albeit partly because of an oil price rebound. 

Hugo Dixon: Greece seemingly has no Plan A or Plan B

11 May 2015

It owes around 324 billion euros. The government doesn’t seem to have a credible plan for reaching agreement with its creditors. Nor does it appear to have thought out how to default while containing the collateral damage.

Euro zone bond rout breaks whole new set of rules

7 May 2015

Remember when life was simple and easy money pushed up all asset prices? No longer. Government bonds whipsawed on Thursday and stocks are down, while oil prices are up. News isn’t the driver, either. The latest market dramas lack a rationale, but they’re still worrying.

ECB’s bank board-crashing makes sense – to a point

7 May 2015

The euro zone’s financial stability gnomes will observe board meetings. Handled right, the ECB should glean extra insight – after all, corporate culture starts at the top. But regular sessions with board committees may reveal more about how Frankfurt’s 123 charges really operate.

ECB’s limits fuelled flash crash in German debt

6 May 2015

The rules of the euro zone central bank’s debt-buying encouraged investors to pile into relatively scarce Bunds. But a small market shift spurred a rush to sell. Rational trading in this irrational QE game led to non-linear – that means big – price changes. More can be expected.

BBVA unnerves with another sudden C-suite shuffle

5 May 2015

Francisco Gonzalez, the Spanish bank’s dominant executive chairman, has replaced the second COO in six years. Picking the head of digital banking as his replacement fits Gonzalez’s tech fascination. But investors are right to focus more on profitability, growth - and succession. 

Market shakeout too incoherent to mark trends’ end

30 Apr 2015

The dollar has stopped rising, German bond yields have stopped falling and both are now flouting consensus expectations. Economic data can’t fully explain the sharp moves. The unwinding of traders’ positions can. But that is not a good enough reason to give up on big trends. 

Renzi’s Italian gamble is worth taking

30 Apr 2015

Premier Matteo Renzi is using confidence votes to ram though electoral reform. He risks a government collapse, and has nearly torn his own party apart. Yet the law should reshape Italian politics for the better - and help the economy.